As a crypto investor, one of the ways you can passively earn money from your assets is through staking. Essentially, crypto staking allows you to earn rewards at regular intervals with little or no effort. It is similar to owning a savings account and earning interest on it, however, with higher risks. If you want to learn how to earn crypto rewards via crypto staking and enjoy a passive income, you’re in the right place. Let’s walk you through!
What is crypto staking?
Crypto staking is simply the process of pledging your cryptocurrency to help authorize transactions on the blockchain. Usually, you won’t have to go through the stress of validating the transactions personally, as the computers in the network will do. You can stake your crypto effortlessly through programs listed on many prominent exchange platforms.
The motivation for crypto staking is earning rewards. Generally, crypto staking rewards are a special kind of revenue paid to crypto owners who support regulating and validating a cryptocurrency’s transactions. Rewards are usually paid in the form of the cryptocurrency that you’re staking.
How does crypto staking work?
If you own a digital currency that makes use of a proof of stake blockchain, you are qualified to stake your tokens. Essentially, staking locks up your coins to partake and helps sustain the security of its network’s blockchain. Validators will then receive rewards in exchange for locking up their assets and partaking in the network validation. This reward will be received in the form of that cryptocurrency and is known as a staking reward.
Also, you can organize a cryptocurrency wallet that helps staking. If you already have your coins in one of these wallets, you can easily entrust a specific amount of them towards staking. Simply select from the various staking pool options and find a validator. They combine your coins with others to help your odds of developing blocks and earning rewards.
Cryptocurrencies that permit staking generally use a special “consensus mechanism” known as Proof of Stake, which is a way that guarantees that all crypto transactions are validated and secured without any bank or payment processor acting as an intermediary. If you decide to stake it, your token becomes an aspect of that process.
A platform like Bitmama simplifies the whole backend process, allowing you to stake your crypto while we handle the rest.
What is crypto validation?
Validators partake in the decentralized computer network that verifies transactions and assures that the transactions registered in a crypto’s blockchain are legitimate. By doing so, they are awarded some cryptocurrency. However, it’s not a riskless process for people who stake their tokens and become validators, since they may still lose a part of their investment by authorizing (potentially fraudulent) transactions that don’t serve any cryptocurrency’s rules.
Even people who don’t have enough tokens to become a crypto validator can effortlessly pledge their coins with an active validator and still earn rewards. So people who have just a few coins can still obtain staking rewards if they work together with a crypto exchange or any other crypto platform to do so. Rewards can easily be deposited into your wallet as they are earned.
Many of the prominent popular cryptocurrencies, like Ethereum, make use of proof-of-stake validation, but not all of them do so, including Bitcoin. Essentially, Bitcoin makes use of proof-of-work, which uses up more computing energy than proof-of-stake and makes use of a process called “mining” to validate its transactions and regulate that coin’s blockchain. Overall, crypto validation is a key aspect of your journey on how to earn crypto rewards via crypto staking.
What is proof of stake?
A recent consensus mechanism known as “Proof of Stake” has emerged. Essentially, it comes with the concept of boosting speed and efficiency while decreasing fees. One major way Proof of Stake decreases costs is by not mandating miners to churn through all the math problems, which is a very energy-intensive process. Rather, transactions on the blockchain are validated by those who stake their tokens.
Staking performs a similar function to mining since it is also the process by which a blockchain network participant gets chosen to add the most recent batch of crypto transactions to the blockchain and gain some crypto tokens in exchange. Also, stakers assist in establishing which blocks are valid.
Although the exact implementations differ from project to project, in essence, crypto users pledge their coins to guarantee the security of the blockchain.
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What kinds of cryptocurrencies can I stake?
Here are some of the cryptocurrencies that are available for staking:
- Cardano
- Ethereum (which just moved from proof-of-work)
- Cosmos
- Solana
- Tezos
Proof-of-work cryptocurrencies make use of mining, which depends on costly computers and can consume a considerable amount of electricity. Generally, they do not support staking. Examples of proof-of-work cryptos are:
- Bitcoin.
- Litecoin.
How much can I earn from crypto staking?
Cryptocurrency staking is excellent for those who want to earn passive income. Staking rewards vary from coin to coin. Essentially, you can receive as low as 1-2% gain from staking or a return as high as 150% per year. The longer you stake your token, the higher your return tends to be.
Generally, coins and tokens that have high market caps propose lesser annual percentage yields (APYs) than tokens with lower market caps. For example, Ethereum (ETH) proposes a 5-6% staking yield APY (Annual Percentage Yield), while less valuable assets like DefiChain (DFI) offer users up to 70–75% profit per year.
How to earn crypto rewards via crypto staking
When you select a program, it will inform you what it proposes for staking rewards. Usually, this offer varies depending on the crypto exchange platform. Once you get the offer and you are comfortable with it, you can commit to staking your tokens. In turn, you will get the promised profit according to the program.
Essentially, the program will pay you the reward in the staked token, which you can easily keep as an investment, put up for another staking, or just trade it off for cash and any other cryptocurrency. Below, we’ve explained how you can start staking your reward.
What are The Benefits of Staking Crypto?
Here is a list of some of the advantages of staking crypto:
1. Earn passive income
If you don’t intend on trading your tokens in the near future, staking allows you to easily earn a passive income. All you have to do is initiate the process, relax, and earn your profit.
2. Easy to get started
You can easily get started with staking with just an exchange or crypto wallet. The process is seamless and doesn’t take a lot of effort.
3. You get a chance to support crypto projects you like
By staking some of your tokens, you make the blockchain network more invulnerable to hacks and attacks. You also strengthen its capacity to process transactions. This serves as a form of support.
Is staking crypto safe and what are the risks involved in staking?
Despite its countless advantages, there are still some risks involved in staking your cryptocurrency:
1. Volatility
Staking generally involves non-stablecoin coins. These coins, like ADA, XRP, and ETH, are extremely prone to volatile price fluctuations. Hence, there’s a substantial risk of losing your funds to an abrupt price decrease or a major market crash.
This case can be especially worsened if you stake your tokens in a fixed staking plan that won’t permit you to access or liquidate your assets until the due date. If the crypto market crashes or you locate another new crypto to invest in, you can’t still withdraw your staked coins or tokens. Nonetheless, choosing a flexible staking plan without compulsory lock-up conditions can avert these risks.
2. Smart contract bugs
Decentralized crypto exchanges make use of smart contracts to operate transactions, and one tiny code error can be highly devastating to its users. Always make use of DeFi platforms and exchanges that have already audited smart contracts to be on the safe side.
3. Hacking risks
This can occur when you stake your tokens on a centralised exchange that carries your cryptocurrency and private keys to access your funds. There’s forever the risk of forfeiting your crypto to one hack or internal organization fraud.
4. Slashing
Cryptocurrency staking platforms help to supervise the technical aspects of staking, such as running the blockchain nodes and liquidating blocks. Assuming they try to validate a false transaction or forget to maintain a 100% uptime, a blockchain network may punish the platform by holding off the block validation rewards or worse, slashing all the staked tokens or coins. Every crypto user who staked a token will lose their investment when abrupt slashing happens.
5. Fraudulent or insecure staking platforms
Some staking platforms may even advertise extremely high returns in order to coax customers to participate in them without completely considering what they will be getting into. So it’s very important that crypto owners carefully scrutinize all platforms.
How can I start staking my crypto?
With so many prominent crypto exchanges proposing staking rewards to their users with some coins, an exchange is an easy path for you if you are considering staking your crypto. However, there are other alternatives for crypto owners, including DeFi lending platforms and staking-as-a-service platforms.
1. Choose a platform
Most prominent exchanges offer staking, which you can effortlessly begin from the exchange’s mobile app or web browser. Generally, the first stage is to browse what coins are available for staking. You will be able to see this information on the exchange you want to use for staking.
2. Agree on the token and terms of staking
Once you’re on a crypto exchange that offers staking, you can then decide which token you would like to stake and how much of it you want to stake. Don’t forget to also keep the staking duration in mind. Some crypto exchanges can offer you “flexible” terms, which implies that you can easily withdraw your tokens at any time, instead of sealing off your assets into a fixed period. This fixed period is generally between 30, 60, 90, or even 120 days. Even with flexible staking terms, you’ll generally have a short waiting period of one day before your tokens will be accessible to you again.
3. Initiate the staking and wait
After you initiate your staking, you have to wait as there’s not much to do. Usually, rewards are sent directly into your wallet according to whatever reward plan the exchange has already established.
4. Consider alternatives
Operating with a DeFi lending platform may be a more tempting option for so many crypto owners because of the lower volatility and price fluctuations of the stablecoins used in them. However, it also presents new risks.
Bitmama – Crypto staking simplified
Bitmama earn is a feature that simplifies the crypto staking process. We’ve walked you through what staking is, how it works and possible risks so far. However, we understand that it may require too many steps, contracts, and processes that you may not have the time to walk through.
With Bitmama earn, you can stake your crypto assets, sit back, and watch it generate passive income for you as we handle the rest. Here’s how:
Follow the steps below to start making money on Bitmama Earn:
1. Download and register on the Bitmama app, completing your verification up till level 3.
2. From your app dashboard, select staking.
3. Select staking once again and click on “earn now”.
4. Enter the payment wallet, amount you wish to stake, subscription type, duration, and other necessary details.
5. Lastly, click “Submit”.
That’s it! Your coin will yield a profit over a duration.
Should you stake your cryptocurrency assets?
The most crucial question to ask yourself when it comes to this is whether staking your crypto aligns with your investment goals. Are you hoping to trade crypto for gain or do you just want to hold it for an extended period?
If you’re seeking a quick trade for profit, staking may not be for you, particularly if the platform mandates a token lock-up. However, if you think your cryptocurrency has a long and successful future, then you can agree to a staking lock-up where you can’t sell until the fixed date. The staking rewards may just be juicer to you by then.
Questions to consider before staking
Here are some important conditions to generally consider:
- Whether you’re mandated to lock up your tokens and for how long
- What is the rate of return you could potentially receive?
- The minimum amount, if there’s any, that’s required to lock up
- What is the size of the full reward pool (if there’s any)?
- The maximum profit for each user or the maximum amount of tokens that can be staked?
These elements all play a major role in whether it is sensible for you to partake in staking. It will also determine how much you can earn from it. You’ll have to decide whether the likely profits are worth the risks you’re taking.
Crypto staking is an easy way to earn an extra passive income from your cryptocurrency assets. Many investors use it because it allows them to earn without lifting a finger. Essentially, it involves donating your tokens or coins to either a liquidity pool or a blockchain financial validation pool.
Above, we’ve discussed how to earn crypto rewards via crypto staking. However, before you proceed with the manual route, it is advisable to properly research the kind of cryptocurrency and the staking platform you plan to use before you start investing your money. The better knowledge you have about it, the higher your likelihood of choosing a promising cryptocurrency and exchange platform to stake.
On the other hand, you can simply stake on Bitmama and allow us to handle the rest while you sit back and watch your crypto assets yield profits over time. Watch how easy it is to stake on the Bitmama app with this short video
Start making money on your crypto without trading today – download the Bitmama app.
